Oil prices have fallen below US$$100 for the first time in two weeks as investors turn to safer assets on concerns that Japan’s widening disaster could lead to a global economic slowdown. However, some forecasters expect Japan’s oil consumption to rebound to meet its reconstruction needs, particularly of products such as diesel fuel used in small power generators. Japan, the world’s third-largest consumer of oil, will also need new supplies of natural gas to make up for the loss of its nuclear reactors that were damaged by the earthquake and the tsunami.
Tensions have flared again in the Persian Gulf as Saudi Arabia and the United Arab Emirates sent troops into Bahrain in an unprecedented move to suppress protests led by the Shiite majority against the Sunni monarchy. This is likely to stoke fears about stability in the Persian Gulf at a time of rising Sunni-Shiite tensions throughout the Muslim world.